Jul 9, 2019
VAULT.investments: Fees dissected
1. Introduction
On the third of May, a new masternode hosting platform saw the light of day. The new platform was created by the same team which is behind PAWS.Fund, who have been working on their Animal Charity Project since late October 2018.
The platform launched with a handful of coins, two to be exact. Both coins are hosted for FREE. The first coin that I mention is VAULT.investments hosted coin on the platform called VAULT. It can be used to pay for hosting and future services provided by VAULT.investments. You can buy VAULT on the exchanges and store them on the platform and let it accumulate free of charge.
The second coin I mention is PAWS. One of the reasons VAULT.investments was created, is to provide support to PAWS.Fund where possible. VAULT.investments is supporting PAWS.Fund and its supporters by providing free hosting. This encourages investors to hold on to their PAWS investment, even when the value is low and expenses to host PAWS masternodes are exceeding the earnings.
As the platform was gaining momentum with PAWS investors, we started to add additional projects and coins to the list of available investment options.
2. The Fees
On the 3rd of July, 2019, the fee module was activated on the platform. All investors had been enjoying free hosting on all the available coins up until that point. Perhaps it came as a surprise for many to see amounts deducted all of a sudden, so how do fees work on the VAULT.investments platform?
2.1 How much is the fee?
For each coin on our platform, fees can be paid in 2 currencies. They can be paid in the hosted coin or you can pay them in VAULT, the currency that comes with the platform. By default, it will charge the fees in the hosted coin. The reason we currently charge in the hosted coin by default is to clearly visualize for our investors what fees are applied. However, we encourage everyone to pay their fees in VAULT, and we do so by giving a 50% discount.
The fees are clearly specified on the dashboard next to each coin, as shown below. For some projects and coins, no fees are charged. Currently, all coins cost $0.07 in VAULT and $0.13 in the hosted currency for a FULL masternode for 1 day. A FULL masternode is the amount that represents the collateral that you would need to run a masternode for that project yourself. The fees are calculated proportionally according to how much of a masternode you hold on the platform.
It would for example cost $0.13 to host 25000 EGG Coin for 1 day on our platform if you paid in EGG Coin. It would cost $0.07 if you paid in VAULT. You pay proportionally of how much of a masternode you have on the platform, so if you had 2500 EGG Coin on the platform, you would only pay 10% of $0.07 if paying in VAULT.
2.2 How are fees calculated?
So, now that we established the size of the fees, how are they calculated? Since we charge our fees in US Dollars but charge it in cryptocurrency, we will need to make a conversion. The conversion that needs to be applied, will be calculated according to the constantly changing exchange rates for each coin. So how can we do this fair for both you, the customer, and us the provider?
We decided to charge in 1-hour intervals. For a day with 24 hours, this means we will have to split the month into 24 intervals. We will have to charge you $0,002916666666667 in each interval paid in VAULT coin. This is a fixed amount, as the daily fee in dollars is fixed too. For each interval, we look at the exchange rates of the cryptocurrency you are paying in and charge you with the above-mentioned amount. This results in varying amounts in the cryptocurrency shown on your transaction overview.
In the above example, due to how VAULT coin is pegged to BTC with a guaranteed price supported by a public fund. We could see how stable the price is over a 24 hour period, where it only briefly dropped below $5 per coin. If you were using lower value coins the price can fluctuate more than 20%-30% in BTC value and when the rewards paid are low in value $0.13 per day could take a lot more of your rewards than you expected.
It is always recommended to pay hosting fees in VAULT coin. Not only is the price of VAULT coin more stable and the fees are half what you pay in the hosted coin, but VAULT coin is also hosted for free and will give rewards like any of your coins so it will take slower to deplete your funds.
2.3 How often are fees charged
The VAULT platform pays rewards every 12 hours, twice a day IF rewards have been generated. Obviously, the more coins have been deposited by our investors, the more masternodes we have set up in our platform and the more likely it is one or more of those maternodes have generated rewards that we then can divide over our investors.
Fees will be calculated for each hourly interval, but will not be charged until a reward is paid to the investor. This means that in the worst case, fees will be charged twice a day and will have the same timestamp as the associated reward. Because rewards don’t come regularly for all coins, the TIME between rewards will likely vary and therefore the SIZE of the fees charged will also vary.
Fees charged in VAULT coin will be showing as a single charge, for all the coins that you have switched to payment in VAULT.
If for example EGG coin rewards are in maintenance for 2 days and then rewards are distributed, you would see a larger reward but also larger fee to cover the full period for hosting between the reward cycles. That is another reason, apart from the changing exchange rates, that fees can vary between charges for those coins with irregular reward payouts.
2.4 The additional fee entries explained
Some people have asked, why then do they see 3 or more fee charges on their transaction overview in one day? How is that possible, if we only charge fees twice a day?
The answer is simple. When a withdrawal is processed, there will be an unpaid number of intervals between the last time we charged a fee and the time the withdrawal is processed. We will charge those outstanding fees when the withdrawal is processed and the fees from then on will be based on the number of coins left on our platform after the withdrawal.
This ensures that we calculate the fees on the correct balance left on the platform after the withdrawal, and it allows us to make sure we can charge the outstanding fees before coins are withdrawn from the platform.
In short… we calculate fees on hourly intervals, but charge them when a reward is paid, which means you normally see 2 fee transactions on your account per day. Each time you make a withdrawal, you will see a fee as well, that charges you for the time the coins were on our platform between the latest charge and the moment your are withdrawing. This is not a withdrawal fee at this point in time.
3. Switching between payment in VAULT and the hosted coin
Due to the way our platform calculates fees, you will see fees BOTH in the HOSTED cryptocurrency and VAULT, when the first reward after changing the fee currency is paid.
Some people got confused and angry seeing the platform taking fees on both ends. But the explanation is quite simple: If you change the fee currency, you will have a period before you changed it, which will be charged in one currency, and a period after you changed it, which is charged in the other currency. This obviously applies, when changing it in both directions.
For example, your EGG Coin asset got a reward at 00:10 and you were charged a fee in EGG Coin. At 6:10, you decide to change it to VAULT. At 12:10, you see that you are charged fees in EGG Coin and VAULT.
This is because the fees were calculated in EGG Coin between 00:10 and 6:10, and calculated in VAULT between 6:10 and 12:10. In the next reward period you would be charged in VAULT.
4. Principles behind the VAULT.investments pricing scheme
During the early discussions of the design of the platform and the pricing scheme we were going to apply to it, we were inspired by pricing schemes and methods around us. Not only in crypto space, but also outside that environment. We wanted a simple pricing scheme, that was easy to understand.
There are a couple of points I would like to put forward, as reasons for our current pricing scheme:
1. We wanted a simple pricing scheme, regardless the coin on the platform. We have either FREE hosting or a very simple pricing scheme.
2. We wanted our expenses to be reflected in the hosting costs. Since our expenses do not vary greatly between coins, regardless ROI or coin value, we currently have not introduced a pricing scheme that takes ROI and coin value into consideration.
The above will mean, that some coins will never be profitable on our platform with the current pricing scheme. Some will never be introduced on our platform for that reason, others might be introduced due to popular demand or alliances that have been forged. It will be up to the individual investor to determine if another option might be more viable.
I would like to highlight in connection to the above, that the name of our platform indicates that we want to keep our investor's assets safe and secure. And that above all it should be simple to operate for everyone, also the not-so crypto savvy types, that are not able to synchronize wallets and operate masternodes themselves. That might be worth the price for some.
5. Conclusion
To wrap this up, I hope this article helped you understand fees and how they are calculated on the VAULT.investments platform. I will admit that due to the volatile exchange rates in crypto, you might be gaining or losing. This problem does not exist only for the VAULT.investments platform, it applies to all services taking cryptocurrency as payment representing a value in dollars.
I do recommend that you switch your fee payment currency to VAULT, as it will give you a 50% discount compared to paying in the hosted currency. And for most people, VAULT is currently generating enough rewards to keep your alternative investments collecting at virtually no cost at all, even for low ROI, low-value coins on our platform.
However, this is a personal choice! Some people prefer to keep the fees in the same currency as the rewards are generated. Adding VAULT to the equation adds another variable exchange rate into the equation.
And remember… if you pay in VAULT, you will see it charged as a single transaction that combines all the fees for all your assets that are set to VAULT.
Useful links:
Website: https://www.vault.investments
Platform: https://my.vault.investments
